Koreans Driving Auto Competition

Back when the steel industry was an economic force in Birmingham, there was little question what car to buy. “Good Alabamians” bought “good American” vehicles made with American steel. But now that steel is a small part of the local economy, there’s a lot more ambiguity on the car lot.

“My name’s Preston Wilson. I’m a reservist, so, I would always buy, probably buy domestic trucks. And the Dodge Ram, the Chevy and the Ford are all good, tough trucks. They’ve improved them over the years to stand up.”

“I’m Mark Van Dyne. I bought a 2001 Nissan Pathfinder. And I’m very happy with it. They hold their value, like on trade in and what not, a little bit better than some American cars. So I guess from a consumer point of view a foreign car may sound a little better to buy.”

Sales of foreign imports in the U-S are surging, as domestic sales flag. Earnings from SUVs and trucks — traditionally a big source of profits for Detroit — have been falling.

The drama of the auto industry plays out at Barry Buckner’s car dealership in Tuscaloosa, Alabama. Buckner grew up in the car business. He was just 14 when he started working at his dad’s Chevy dealership back in the 60’s. At that time, American cars ruled.

“My father told me when they came and they asked him, did he want to have a Honda franchise and he just ran them out of the showroom! He says that was a multi-million dollar mistake!”

24 years ago Buckner opened his own Oldsmobile dealership. And business was good until December 12, 2000, when General Motors announced that it was going to phase out the Oldsmobile. On this day, a GM contractor is up on the roof of Buckner’s showroom, tools in hand.

He’s taking down the GM satellite.

Ott: “Does it feel like the end of an era? The machinery’s being taken out this week, the sign’s coming down?”

“No. I went through that 4 years ago. I went through feeling bad and you know and I?m ready to move forward. All the signs are supposed to come down over the next couple of weeks too. I’m looking forward to replacing our General Motors sign with our Hyundai sign.”

Buckner is a sign of the times, moving from the now-defunct Oldsmobile to Hyundai. Last week, the Korean automaker opened its first U-S manufacturing plant in Montgomery, Alabama, to much fan fair. The Korean national anthem plays thousands of plant workers, dignitaries, and other invited guests assembled under a tent.

“Goodmorning Ladies and Gentleman. Today, after three years of construction and countless hours of pre-production testing, HMMA is officially open for business!”

Hyundai Motor Manufacturing Alabama President M.H. Lee. Just five years ago the Koreans rated poorly on quality and performance. But Hyundai has made big strides. Consumers Reports recently named Hyundai’s Sonata sedan “the most reliable car in the United States in 2004”. Hyundai sales in the US have more than quadrupled in the past 6 years and they’re likely to increase a lot more when the new plant is in full gear.

The plant is one of the most automated in the world. In the welding shop, more than 250 robots move material, weld and seal — converting stamped steel into stripped-down vehicles.

“We install just under 2,000 welds with our robots in this department and overall there are just over 6,000 welds on the automobile.”

The paint shop is also 100-percent automated.

Automation isn’t the only advantage Hyundai brings to the global auto battle. It also benefits from setting up shop in a right-to-work state like Alabama. Hyundai’s starting wages are about the same as unionized workers at GM or Ford, but University of Alabama auto industry expert Jim Cashman says a non-unionized workforce pays off for the company in flexibility.

“You can expect more and demand more of a workforce that is not organized, as opposed to one that is. You can do so faster, easier. I think it has less to do with dollars and more to do with capability of continuing to adapt and shift.”

Foreign automakers have opened plants throughout the Southern United States. Hyundai invested 1-point-1 billion dollars in its new Alabama plant, hiring some 2,000 local workers. Alabama is also home to Mercedes and Honda. Nissan and Toyota also have a presence in the South. Auto analysts say this could make foreign cars even more attractive in the region.

GM and Ford are watching the Hyundai plant closely. The opening last week included appearances by some high profile folks, including former President Bush, who was invited by a friend to the opening ceremony.

“You know, back when I was president, I worked with like minded public citizens to help open the global market because of days like today. Simply put, I was convinced that there would not be a giant sucking sound of jobs leaving the country. Quite the contrary, I believe that more companies like Hyundai would come here, have access to the most advanced economy, the best workforce anywhere in the entire world.”

That’s not to say that Hyundai and other foreign producers have an easy ride in the U.S. One big challenge is producing high-quality vehicles without raising prices. There’s a Korean proverb — “If you want catch a tiger, you have to go to the tiger’s cave”. It means that if you want to achieve a goal, you have to go to the source, work hard and overcome difficulties. A new difficulty may be looming soon for both the U.S. automakers and the Koreans. The little-known Chinese automaker Chery Automobile plans to ship low-cost sedans and SUVs to the U.S. in the next few years.